Public Business Advice in the Founding Process: An Empirical Evaluation of Subjective and Economic Effects

Abstract

This paper investigates economic and subjective effects of public business advice delivered to nascent entrepreneurs in Germany. We analyze data from the Thuringian Founder Study, an interdisciplinary research project on innovative entrepreneurship. Employing cluster analysis, we first explore the actual scope and intensity of business advice used. Two distinct groups of policy take-up can be identified: 1) use of intense assistance across all areas, and 2) use of less intensive assistance being limited to operational issues. Then we analyze personal entrepreneurial resources (human and social capital, entrepreneurial personality profile) as predictors of take-up and perceived usefulness taking into account the different patterns of utilized advice. Finally, we assess economic effects by studying subsequent business performance employing propensity score matching. We cannot reveal that business advice translates into better start-up performance, but our results indicate that advice may help founders with fewer resources to overcome barriers in the founding process. We find that a lack of personal entrepreneurial resources predicts take-up of business advice in general as well as perceived usefulness of comprehensive business advice.

The regional distribution and correlates of an entrepreneurship-prone personality profile in the United States, Germany, and the United Kingdom: A socioecological perspective.

“…Further support for the validity of this personality profile comes from evaluation research. Kösters and Obschonka (2011) showed this profile to be related to founders' perceived effectiveness of public business advice delivered during the founding process; those founders with lower levels of an entrepreneurship-prone profile benefited most from intensive advice, probably due to their lack of entrepreneurial competencies or a balanced skill set. Finally, consistent with existing theoretical models on the mechanisms trough which the Big Five traits affect entrepreneurship (Rauch & Frese, 2007b), Obschonka, Stuetzer, and Goethner (2012) found this profile to affect entrepreneurship via more specific entrepreneurial traits like self-efficacy, risk-taking, and internal locus of control.…”

Take-up and variation of advice for new firm founders in different local contexts

“…The social benefits argument suggests that the benefits of advice diffuse through the economy in increased jobs, innovation or lower prices that are created by firms that take advice (Capelleras et al 2011, Kösters and Obschonka 2011, Larsson, Hedelin and Garling 2003. The asymmetric information problem in advice as mentioned in the introduction suggests that many firms have little awareness of advice available, how to access it, how to value the quality of advice or the benefits of the advice to them (see Mole, North and Baldock 2016).…”

“…The timing of the advice in this paper is before the founder starts their business, when most advice is sought and taken (Haughton 1993, Kösters and Obschonka 2011, Blair and Marcum 2015. In the established view taking advice reflects a perceived knowledge gap (Chrisman et al 2005).…”

“…The dependent variable of this study is the take-up of advice. To measure the take-up, respondents were asked whether they received face-to-face business advice before the firm started, as used in previous research (Kösters and Obschonka 2011), from a list of up to 33 sources of advice from accountants, solicitors, through to publicly supported advisory services (1 = yes, 0 = no) for both the English and Spanish samples respectively. The other two dependent variables are the take up of advice from private sector and public sector sources, respectively.…”

An Evaluation of Public Spending: The Effectiveness of a Government-Supported Networking Program in Flanders

“…The fi ndings of several survey studies suggest that the impact of external support to SMEs is rather limited (eg, Bennett and Robson, 1999;Crick, 1997;Klonowski, 2010;Kösters and Obschonka, 2011;Mahajar and Yunus, 2006;Moini, 1998;Robson and Bennett, 2000;Wren and Storey, 2002). Other studies do provide evidence in support of government assistance to SMEs (eg, Belso Martínez, 2010;Gongora et al, 2010;Marshall et al, 1993;Mole et al, 2009).…”